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The 10 cheapest states are in the West or Midwest as many levy no corporate taxes and have fewer regulations. The two most expensive states are California and New York due to higher taxes, wages, rents and regulations.

Succeeding as a small business owner is always difficult with 20% failing in the first year. It is perhaps even more challenging now as entrepreneurs are battling inflation, rising operating expenses, and uncertainty from tariffs and trade negotiations. In this climate, it may be more important than ever for business owners to set up shop in an affordable location.

Simplify LLC released a study on the Most and Least Expensive States to Start a Business in 2025 using the most recent data from the Bureau of Labor Statistics, Federal Reserve of St. Louis, Tax Foundation, and the Energy Information Administration.

The rankings were determined by analyzing nine key factors in all 50 states and D.C. including taxes, labor costs, commercial rent and utilities, regulations, lending, and more.

Key Findings:

• New Jersey No. 7 Most Expensive State:New Jersey businesses may find increased costs due to red tape (296,926 regulations, #49),  high wages ($80,570, #45) and a 7.67% corporate tax (#42). Electricity costs are also high, with an average bill of $780.47 per month, (#38), while LLC filing fees are $125 (#31 tied). New Jersey has moderate scores in labor force participation (64.6%, #19 tied) and SBA lending ($9.4 million per 100,000, #14). 

• 10 Cheapest States: Utah, South Dakota, Colorado, Wyoming, Montana, Idaho, Nebraska, Kansas, Nevada, and North Dakota. 

• 10 Most Expensive States: A mix of big and small states. California, New York, Hawaii, Tennessee, Massachusetts, Alabama, New Jersey, D.C., Illinois, and West Virginia.